In this note, http://web.mit.edu/krugman/www/MINIMAC.html, Krugman develops a simple model to introduce the idea that whenever an economy experiences price rigidity then this economy is demand-constrained. I have troubles to understand why. I know ISLM model and the basic NK DSGE model with price rigidity but I feel I miss the intuition why price rigidity implies demand constrained economies.

Thank you!


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